Monday, June 9, 2008

Watching CNBC (Rising Oil, Falling Dollar and Lehman Brothers)

I used to be a regular morning CNBC watcher. I was a big fan of Squawk Box. Lately, I am finding it harder and harder to watch it. This is kind of a shame since the market events that we are currently experiencing are very interesting. I think the problem is that the reported events are hitting me in the wallet almost immediately.

I have been telling people that this is a reverse of the events of 1998. Then I was the market data manager for Bank of America Securities and I had a front row seat. While most of the US was concentrated on the possible impeachment of President Clinton I was watch the world almost stumble into global financial meltdown (Asian Flu was the term used at the time). The numbers that flashed across my screens were very frightening. In fact when the spreads of the US treasuries widened suddenly I got a call from the Head Corp Investment Trader asking me to confirm the data that was being displayed.

There were some key differences in 1998. Since the global markets were in pain money was flowing into the US market and the economy was pumping because of consumer spending. I think things must of looked good if you weren't looking a Financial Market Data all day. I remember hoping the Congress would do the right thing and not impeach the President. It would have been the straw that broke the camel's back.

Things have certaintly changed. After cranking a long the US economy has finally started to come to a halt. It was inevitable and we have experience a much longer period of economic growth than was expected. We had cheap money, cheap fuel and real estate went from experiencing slow steady growth to exponential growth. Only the first time home buyers really had any worries but since everything was going up there was no real worries. Besides the newly available mortgage products would help everyone buy the McMansion of their dreams.

Unlike 1998 the current market is creating lots of pain for most Americans. It is almost instaneous. Oil futures spike on Friday and we spend the weekend paying record prices for gas. The number of foreclosures increases significantly and the moving trucks show up unexpectedly at our neighbor's house.

As I ride my bike I notice all of the for sale signs. Especially on the new construction. It was sign that so many builders were willing to build multi-million dollar spec houses. I have always wondered where these buyers came from. How many of these spec houses started out with qualified buyers that decided to walk away from the contract?

As a NY based IT expert the disappearance of Bear Stearns and the possible disappearance of Lehman Brothers affects me since there are less firms available to buy my services. This is certainly cause for concern.

On the other hand I think there are some positives.

  • Rising fuel prices will do more for the environment than all the Al Gore PowerPoint presentations and Benefit Concerts. At $4 plus a gallon there is a market for alternative forms of transportation that just did not exist at $1 a gallon. In the short run there are probably less cars on the road and the Hummers are being parked. I expect that there will not be a big investment until the high prices have been around for a while because if prices fall as is expected we will be right back to our old habits. I know that I have my eye on the big Audi SUV or a Honda Ridgeline but I think my next car is going to be something even smaller than my Infiniti G20.

  • The falling dollar helps sell US made products in the global market place. Too bad we do not have much to sell since much of our manufacturing has already been moved off shore. Even core US brands such as John Deere and Carrier have been building there products offshore for years. In fact the Honda or the Toyota has a good of chance of being built in the US as does the Ford or Chrysler product.

  • The Real Estate market was going to correct sometime. We probably enjoyed several more years than we should have. Maybe there will be some lessons learned. Probably not.

  • Failures such as Bear Stearns and maybe even Lehman Brothers should generate some short term opportunities for the integration (IT and Business) experts. There might be some lessons learned here as well.

I realise that this posting does not really fall under Music and Sports but it might be classified as Adventure since it is certainly going to be interest to see how it all settles out. I decided that everyone else is a pundit so I might as well give it a try.

I am hoping to attend the SIFMA Technology and Management Conference at the New York Hilton this week. The theme of this years conference is Managing IT in Financial Services During the Credit Crisis. It will be interesting to see what the various vendors have to show.

No comments: